Saturday, May 08, 2010

Noahstradamus makes a prophecy for 2025

I've written a lot on this blog about how, if a rising China challenges the global political order than has prevailed since WW2, it would entail serious costs for the entire planet. Now I'd like to make this warning a little more concrete, by predicting exactly when such a challenge is most likely to occur.

Specifically, I predict that if it comes, it will come in or around the year 2025.

Why? Well, after the midpoint of the next decade, China will have some serious issues to deal with.

The first of these issues is energy. China, like most countries, uses two main sources of energy: coal for producing electricity, and oil for transportation. Both of these will be in short supply after the mid-2020s. The International Energy Agency predicts that global oil production will hit a plateau in 2020 and start to fall in 2030; various studies put the peak of China's domestic coal production between 2020 and 2030 as well, and coal is difficult and expensive to import. Scarcer energy will seriously erode China's unbeatable competitive advantage in manufacturing (much of which was built on extremely profligate use of energy), and nuclear and renewable energy will even come close to making up the difference.

Now, you may be thinking: won't the increasing scarcity of energy make China more likely to mount a serious challenge to the global order (as Japan did in 1941 when its oil supply was cut off)? Well, yes, but China is not stupid, and will see (actually, has probably already seen) the supply crunch coming. If China wakes up and finds that its coal and oil supplies are dropping fast, it won't be able to do anything, because taking control of a large amount of foreign energy supplies requires using a lot of coal and oil. Wars take lots of fuel, and building a big enough military to supplant the U.S. in its system of global alliances takes a lot of fuel too. China's best move is therefore to take control of as much global fossil fuel supply as it can while it still has enough energy to spare; as many have noted, this is what it is already doing. If China waits til after 2030 or so to make its move, it will be too late.

China's second challenge is its population structure. The country is aging rapidly; the U.S. Census Bureau predicts that the population will begin to decline in absolute terms starting in 2026, and the dependency ratio (the ratio of non-working people to working people) is expected to rise sharply around the same time. Nations that age this fast run into all kinds of natural limits to growth, as children are obliged to spend most of their money supporting their parents and grandparents; in addition, a lack of surplus sons makes it fairly difficult to maintain a big army. Even easing or lifting the one-child rule will not be sufficient to boost China's fertility, so this rapid aging is essentially a foregone conclusion.

China's third challenge is another natural resource: water. China's most important farming region, the North China Plain, is experiencing rapid groundwater depletion, and global warming is playing havoc with the country's rivers and rain patterns. By 2030, these problems will force China to import a lot of food, and will throw a bunch of farmers off their land, causing social disruption.

Finally, China's biggest challenge is simply the dizzying speed of its own economic growth. According to the Solow growth model, the simplest and most widely used model in macroeconomics, countries that invest heavily in physical capital see diminishing returns to scale as their economy becomes saturated with this capital; their growth then slows, no matter how high their savings and investment rates. The experience of countries like Japan, Korea, and various countries in Europe suggests that this slowing happens when a country reaches about half of the per-capita GDP of the richest nations (i.e. the U.S.). If China keeps growing at its current rapid rate, it should reach half of U.S. per capita GDP (in PPP terms) by 2030. The slowing of China's growth will create internal political tensions, as people who had come to expect a permanent gravy train demand a bigger slice of a slower-growing pie. It will also leave less of an economic surplus for China to spend on things like war with other great powers.

So in the late 2020s, China will experience rising energy costs, rising food and water costs, a rapidly aging population, the shrinking of its workforce, and diminishing returns to investment. All of that will not make it impossible for China to challenge the U.S. and its allies for global dominance, but it will make it a much dicier proposition.

But of course, as things stand, China is still not powerful enough to displace the U.S. as global Top Dog. Our military technology is still significantly superior, our economy is still significantly larger, and we and our allies still control a very big chunk of global energy supplies. China's leaders are cautious; if they try to mount a major challenge to U.S. power, they will wait until the last minute to do so. Which brings me to my prediction of 2025.

What would such a "challenge" look like? To be honest, I don't know. In the past, it was usually a war, but nuclear weapons make that seem unlikely in this day and age. China might attack a U.S. ally, I suppose - conquer Taiwan, or seize the territory it still claims in India - but even that seems pretty darn risky to me. Some sort of geopolitical assertion of authority, backed up by the implicit threat of military force, seems more likely. They might simply move to somehow take de facto control of a big chunk of global energy supplies, but not being well-versed in these things, I'm not sure how they'd do it. Or they might stake a unilateral claim to the South China Sea, declaring that the U.S. rule of free ocean transport is over and done.

Or they might do nothing. It may be that in an age of dwindling populations and energy supplies, controlling the geopolitical order is just not worth it for any country, even one with China's oligarchic governmental structure and nationalistic sentiment. I hope that this is the case, and in fact I think it not unlikely that China will decide simply to live within the existing order after all.

But I wouldn't bet the farm on that happy outcome. And neither should the United States and our allies; we should be expanding and strengthening our alliances, maintaining our technological edge, and adopting sensible far-sighted economic policies. If the challenge does come, then the more ready for it we are, the less destructive and dangerous it will be.

5 comments:

I'm more worried about surplus sons than surplus daughters, because we all know that the main reason China is going to start any wars is going to in order to take over nearby countries and take their women.